US Tariff Earthquake: Indian Sectors Facing the Heat, Who Will Survive the Storm?

August 26, 2025 – The United States has shocked India with a tariff earthquake. From August 27, 2025, Washington will impose a 50% duty on a wide range of Indian goods. The action is linked to India’s continued purchase of cheap Russian oil, something the U.S. wants to punish. The sudden tariff shock is not just a trade move. It threatens millions of jobs, billions of dollars in exports, and the survival of several small industries across India.

The Hardest Hit Sectors in India

1. Textiles and Apparel

India’s textile industry is one of the largest exporters to the U.S. Shirts, trousers, cotton fabrics, and ready-made garments are a big part of this. With the new 50% tariff, Indian textiles will no longer be price competitive in America. Low-margin businesses will collapse. Thousands of small and medium enterprises (SMEs), especially in Tiruppur and Ludhiana, are on edge. This is one of the sectors most at risk.

2. Gems, Jewellery, and Diamonds

Surat, Gujarat, is called the diamond capital of the world. Nearly 90% of global diamonds are polished there. But now, the U.S. tariff shock has left the industry in crisis. Reuters reported that offices in the Surat Diamond Bourse are lying empty, as American buyers have stopped placing new orders. Traders warn of 200,000 possible job losses. Small artisans, who depend on polishing and cutting contracts, may see their livelihoods vanish overnight.

3. Seafood – Especially Shrimp

The U.S. is the largest market for Indian shrimp exports. Tariffs of up to 50% will make Indian seafood uncompetitive. Exporters are already slashing prices by nearly 20%. This will affect fishermen, aquaculture farmers, and coastal states like Andhra Pradesh and Kerala. Shrimp farming, which was booming in recent years, faces collapse if alternatives are not found.

4. Carpets, Furniture, and Home Goods

Handmade carpets from Bhadohi, brassware from Moradabad, and wooden furniture from Jodhpur are world famous. But all these are labour-intensive exports heavily dependent on the U.S. With the new tariffs, many of these goods will be too costly for American buyers. Local communities in Uttar Pradesh and Rajasthan are likely to face huge income losses.

5. Chemicals and Auto Parts

The chemical industry, particularly dyes, intermediates, and low-value chemicals, exports heavily to the U.S. These are often produced by SMEs with thin margins. Higher tariffs will squeeze them out of the market. Similarly, auto components made for export could suffer. India is a growing hub for auto parts, but steep tariffs will reduce competitiveness.

6. Regional Export Clusters

The damage is not just sectoral, it is geographical. States like Uttar Pradesh, Gujarat, and Tamil Nadu will face concentrated shocks.

• Moradabad: Brassware exports will struggle.
• Bhadohi: Carpet makers may shut down.
• Kanpur: Leather exporters face uncertainty.
• Surat: Diamond workers already sitting idle.
  These regional export clusters may take years to recover.

7. MSMEs Under Threat

Micro, Small and Medium Enterprises (MSMEs) contribute nearly 45% of India’s exports. Most of them operate in the labour-intensive sectors directly hit by tariffs—textiles, gems, seafood, furniture, chemicals. Many of these small businesses do not have the capital to survive long disruptions. This could trigger mass unemployment and debt defaults.

8. Wider Economic Impact

The U.S. is India’s largest trading partner. With these tariffs, overall exports will fall sharply. Analysts expect India’s GDP growth could shrink by around 1%. Stock markets have already reacted negatively. According to Reuters, Indian companies have seen the biggest earnings downgrades in Asia over the last two weeks. Sectors like automobiles, consumer durables, and capital goods are feeling the heat. Investors are nervous, and the rupee has touched new lows against the dollar.

Sectors That May Remain Safe for Now

1. Electronics and Semiconductors

Interestingly, electronics and semiconductors are exempt from the new U.S. tariffs. This is a relief for India’s growing smartphone and hardware industry. With global supply chains shifting from China, India’s electronics sector has gained importance. The U.S. does not want to disrupt this. Companies in Noida, Tamil Nadu, and Karnataka are likely to remain safe for now.

2. Automobiles (Passenger Vehicles)

While auto parts may be hit, passenger cars and SUVs are safe. The tariff list does not cover these products. This gives relief to automobile exporters like Tata Motors and Mahindra, which have a strong international presence.

3. Pharmaceuticals

India’s pharmaceutical exports, especially generic drugs, are vital for U.S. healthcare. American hospitals and pharmacies depend on cheap Indian medicines. For this reason, pharma has not been directly targeted. Though there could be indirect pressures, the industry is expected to remain steady.

4. Consumer-Driven Domestic Sectors

While export-heavy sectors are in trouble, domestic consumption-based sectors like FMCG, retail, IT services, and e-commerce remain stable. These industries are driven by the Indian consumer and are less exposed to U.S. tariffs. In fact, some investors may shift funds to these safe havens.

5. Healthcare and Capital Goods

Market experts suggest that healthcare and capital goods could see increased interest. These sectors are not very dependent on U.S. exports. Instead, they benefit from India’s rising domestic demand. As exports shrink, companies may refocus on internal markets, boosting these industries.

6. Diversification of Trade Partners

India is also looking to diversify exports to Europe, Asia, and the Middle East. While the U.S. will remain important, building new markets can reduce dependence. For example, seafood exporters are eyeing Japan and the Middle East. Textile companies are looking at Europe. Diamonds may see more demand in Gulf nations.

Impact in Numbers (Easy Breakdown)

• Tariff Rate: 50% on many Indian exports starting August 27, 2025.
• Most Hit Sectors: Textiles, diamonds, gems, jewellery, shrimp, carpets, chemicals, auto parts.
• Jobs at Risk: Over 200,000 in Surat’s diamond hub, thousands more in MSMEs.
• Regional Pain: Uttar Pradesh, Gujarat, Tamil Nadu worst affected.
• GDP Impact: Could shrink growth by around 1%.
• Safe Sectors: Electronics, passenger automobiles, pharma, FMCG, healthcare.
• Stock Market Effect: Earnings of large firms downgraded by 1.2% in two weeks.